Cutting Down Returns With Predictions And Gift Cards

Amazon is not the only retailer grappling with a staggering number of returns: All sorts of retailers — especially some with generous return policies — have faced challenges with large numbers of returns. In the case of one retailer, SupplyAI’s Karthik Sridhar, the company’s CEO, noticed that customers took advantage of a long return policy. Since the retailer had a 365-day return policy, a sizeable number of returns were happening long after a customer purchased an item — and possibly used it.

“It took us seven hours to figure out that 12 percent of returns happened in days 330 to 365,” Sridhar told PYMNTS.com in an interview.

Customers return their orders for a number of reasons. Aside from sending back, say, a pair of pants that doesn’t fit, customers might send back an order because it missed an expected delivery date (although that usually doesn’t happen with Amazon, Sridhar said). Other customers may return an item they never really intended on keeping: They might order an extra item to meet a minimum requirement for shipping, for example. That’s where tools, such as Sridhar’s SupplyAI, come in. Among other features, his tool provides an alternative. Instead of having a customer order an item they don’t want to make a minimum, his software allows retailers to offer them a gift card to reach the minimum instead.

Sridhar noticed that the approach works: Sixty-two percent of the time people buy a gift card when offered. He said, “To the customers, it’s … liquid money that he has. It’s not as if he’s lost that money … the customer gets that gift card that he can use in the future.”

And, of course, the retailer benefits, too: It doesn’t have to deal with a return. Sridhar said, “It’s a win-win for everyone.”

To offer those kinds of solutions, Sridhar combs through information retails currently have on customers. He explained, “All we do is to look through some of the habits or some of the patterns of behavior that customers have already shown.”

His tool could take into account the size of clothing that customers order or even their style. Once a customer makes a purchase, the software can send them options in the same price point as suggestions. If they like that item, they can make the change after the order has been placed but before it has been shipped or processed.

“That’s the window of opportunity for us, the moment of truth as I call it,” Sridhar said.

The reason? People who are unsure of what they bought tend look at their email confirmation or the product detail page after they’ve made a purchase.

Retailers And Return Policies

Amazon has recently been in the news for reportedly banning shoppers for what The Wall Street Journal (WSJ) notes are “infractions such as returning too many items, sometimes without telling them what they did wrong.”

That might push against the image of the eCommerce juggernaut as a conduit to returning goods with ease and speed. And, as the WSJ noted, “lax return policies” have led to consumers to expecting similar return policies from retailing peers, no matter whether they are physical (read: brick-and-mortar) or digital locations.

In response, some firms have revamped their own return policies. At Nordstrom, no receipt is necessary. At IKEA, a consumer has up to a year to give something back, as noted by retailcustomerexperience.com. The eCommerce return rate is high, at 20 percent versus 9 percent for brick-and-mortar firms. The holidays can expand those rates to as much as half of items bought, Shopify said at the end of last year, with statistics gleaned from Forrester.

The fallout has spread across social media, as Amazon consumers have said their accounts had been closed without reasons offered by the company — other than that, it has “sole discretion” over who gets to buy and who doesn’t. According to Chris McCabe, a former policy enforcement investigator with Amazon and now a consultant at ecommerceChris.com, the bans come when “you’re creating a lot of headaches for Amazon.”

In response to the ban, Sridhar said Amazon’s move was “unprecedented,” yet understandable, when they see that abuse is happening: “I think it’s a natural step for someone like an Amazon to take it.”

Even so, Sridhar sees an alternate approach to returns through the use of his software through positive reinforcement. By using his platform, he believes that retailers can make behavioral changes that are “positive for them as well as retailer[s].” With that approach, retailers can recapture revenue — along with customer loyalty.

In addition, retailers can scale back their return policies. And that retailer that Sridhar worked for with the 365-day return policy? He said it “went back to being a 30-day policy in no time.”